Is it too late to invest in stocks?

After the decimation that took place in stock portfolios in 2008, many could be forgiven for giving up on stocks altogether. But in the last four years, stocks have provided what is for the average investor a once-in-a-lifetime opportunity. Is it too late to get in?

While few would have had the nerve  in March 2009, an investor in an S&P 500 Index fund could have enjoyed fairly steady annual gains of 22 percent, not counting dividends  way more than the 7 percent long-term average return on investment in stocks.

Meanwhile, with money-losing Twitter going public this month with a very high valuation, talk of a bubble  particularly in technology stocks  is back. But there are three reasons we are not in a tech bubble, and probably won't be in one for a while.

What is a bubble anyway? It's a topic that is featured in a debate among this month's Nobel prize winners. University of Chicago's Eugene Fama and Yale's Robert Shiller recently won The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

But Mr. Fama pointed out that Mr. Shiller  who is famous for predicting bubbles  can't even define one.

In response to that comment, Mr. Shiller tried to offer a definition. He told NPR, "You can have a fairly high degree of confidence. That's what I felt in the stock market in late 1990s. I wrote the first edition of my book, 'Irrational Exuberance,' then, because and I was rushing to get it out. I told my publisher, Princeton, 'Please get this out! Because I want this book out before the crash, not after.'"

In my view, there are two kinds of bubbles  debt and equity.

In a debt bubble, bankers getting compensated to make big deals  not to make those deals payoff  pour so much capital into a class of assets that they soar in price. This draws in dumb money that drives up the prices, even more because they are going up. And when the borrowers can't repay their loans, the loss is covered by bank shareholders and the government.

Over the last 30 years, there have been enough bubbles to discern a pattern. In the early 1980s, for example, banks were lending money to oil and gas drillers and real estate developers in the southwest. Banks would make the loans and sell them off to other banks.

According to Belly Up, since the originating banks shifted the loans to the balance sheets of other banks, the originators kept on pumping more money into those oil and gas drillers and real estate developers  driving up prices and creating a fever to lend more from those who were missing out. When those borrowers lacked the cash flow to repay the loans, the banks that held onto the loans were hurt the worst.

Debt-fueled bubbles that followed  the S&L and LBO bubbles of the late 1980s and the 2008 subprime mortgage bubble  shared three key attributes:

 Bankers were compensated to close deals, not to get loans repaid;

 Rising prices attracted dumb money that bought assets because they were going up in price; and

 The risk of repayment was shifted onto other financial institutions and ultimately the government.

The equity-led dot-com bubble of the late 1990s was similar but its impact was less catastrophic. For example, there was no need government bailout of any financial institutions due to the bursting of the dot-com bubble.

To be sure, many individual investors got sucked into investing in the shares of dot-com companies that had little revenue and no profits. But for the most part, people bet their own money and took their lumps without government compensation.

And it is this sort of equity-led bubble that the New York Times thinks we are in now. "Money-losing technology companies are going public at you've-got-to-be-joking prices. The founders of Snapchat are getting multibillion-dollar offers  and turning them down. And the Nasdaq composite index, a visible symbol of the '90s dot-com boom and bust, is a sneeze away from 4,000, a level it last reached just before, well, you know," writes the Times.

Here are three reasons we are not about to witness another equity-led bubble bursting:

 Price/Earnings ratio too low. In January 2000, the S&P 500 P/E ratio based on trailing twelve months earnings as reported was 29, now it's 19.8. Even though that P/E ratio has risen from January 2012's 14.9, the current level does not imply excessive over-valuation.

 Number of tech IPOs is too modest. In 2013, there have been 28 tech IPOs, and there may be 31 by year end, according to PitchBook. In 1999, 308 tech companies went public, according to Morgan Stanley. To be sure, Twitter's IPO has gotten plenty of attention  since so many in the media seem to use the money-losing service. But we have a long way to go before the IPO market looks like it did in 1999.

 Popular media bubble fever absent. In December 1999, Amazon's Jeff Bezos graced the cover of Time as its Man of the Year  and everyone was talking about dot-com stocks. These days the public's interest in stocks is muted and the popular conversation is about the failure of a government web site.

There is one data point that makes me a little concerned. More money has poured into equity mutual funds in the first 10 months of 2013 than it has since 2000. According to Morningstar, so far in 2013 $172 billion has sluiced into equity mutual funds. For all of 2000, $272 billion of public money went into stock mutual funds.

But most of the 2013 cash has gone into international funds rather than tech, according to Morningstar.

And what Mr. Bezos' face on the cover of Time 14 years ago reminds me is that, unlike debt-fueled bubbles, equity-led ones produce some real companies in their wake.

I do not think it is too late to invest. I think buying an S&P 500 Index fund with low fees and expenses is the way to do that. While it would not surprise me if stocks do get into a bubble in the future, for now I think that the missed opportunity of not being in stocks is greater than the risk that such an investment will lose money.

Peter Cohan of Marlboro heads a management consulting and venture capital firm, and teaches business strategy and entrepreneurship at Babson College. His email address is peter@petercohan.com.